Arguably the United States could be one of the most defensive and protected nations in the business world. Why is America, the beacon of capitalism, so scared of free trade and open markets?
The recent event in the outsourcing industry is a moot point. Ted Strickland, the Ohio Governor who banned outsourcing, is the latest American politician to be put on the firing line by the proponents of borderless-trade. The US government recently increased the H1-B and L1 visa fees under the auspices of the Border Security Law. These fear driven policies go against the ethos of competition and open trade.
US and Protectionism
The US has always been a loud proponent of lifting trade barriers to ensure its exporters are taken care of. It has become the big neighborhood bully who will not only snatch everything from other kids but also make sure that he gives nothing away. Countries like India took nearly five decades to come out of the post-Independence Government sponsored protectionism of its businesses.
“Protecting trade can be tempting until everybody understands that protectionism does not protect”
There is now openness to allow businesses to come in and businesses to repatriate their earnings back home. The US seems to be regressing into the past with its protectionist measures. Whether it is Farm Security and Rural Investment Act, which protects US farmers through subsidies, or the annual trade “Watch lists” which threatens actions against countries that seem to contradict US patent laws even though they are in line with international law. With these numerous trade defense instruments, the US is probably one of the most protected business environments in the world.
Outsourcing and US Employment
Is this fear of opening up based on facts? Look at the fear of losing jobs due to outsourcing. Service jobs, like in retail, catering, personal care services etc, have an inherent interaction between the service provider and the consumer. These jobs cannot be outsourced.
With the service sector making up more than 70 to 80% of the US economy the number of jobs that will be outsourced will hardly dent the US employment figures. Moreover the jobs that are being outsourced are making the American companies more competitive. To quote the WTO Director General, “Protecting trade can be tempting until everybody understands that protectionism does not protect.” Probably the same goes for jobs as well. If at all it protects something, it is the vote banks.